Cheap brands test GUD market
THE household appliances and cleaning products supplier GUD Holdings has booked a 21 per cent fall in first-half net profit and says its well-known Sunbeam appliances brand is feeling pressure from stiff competition.
GUD says most of the sectors in which it trades remain highly competitive. On Tuesday, it booked a net profit for the first half of the 2012-13 financial year of $18.19 million, down from $23.04 million in the the previous corresponding period.
GUD said group earnings had fallen as a result of a weak operational result in the company's biggest division, consumer products, which includes Sunbeam and Oates cleaning products.
Underlying earnings before interest and tax in the consumer products division fell 38 per cent to $11.9 million. "During the [first] half, we experienced challenging trading conditions in our consumer businesses," the managing director, Ian Campbell, said.
Sunbeam experienced the largest decline, hurt by the collapse of the appliances retailer Retravision; greater competition from cheaper, lower-quality household brands; and inroads made by European brands seeking to increase sales outside their depressed home markets.
"The consumer business will remain under pressure in the second half, while we introduce our strategic initiatives to strengthen Sunbeam's financial performance," Mr Campbell said.
GUD would seek to strengthen the financial performance of the Sunbeam brand through a cost-reduction program, more-focused product development and offshore alliances aimed at building scale.
GUD also said net profit had been pulled back by $3.6 million in integration and restructuring costs for the Dexion Commercial storage solutions business. Profit had also been affected by the absence of a dividend from the kitchen appliance maker Breville. GUD sold its 19.3 per cent stake in Breville in February last year.
In the previous corresponding period, Breville contributed a dividend of $1.8 million.
Mr Campbell said despite tough competition and lower profits, GUD was in a strong financial position and was seeking acquisition opportunities to drive future growth.
Net debt had fallen substantially since December 2011, and gearing (net debt/equity) was 35 per cent compared with 49 per cent a year ago.
GUD's revenue for the six months to December 31, 2012 was up 0.2 per cent at $311.78 million. It declared an interim dividend of 26¢ a share, fully franked. AAP
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free